2016 (10) TMI 1252 - AT - Central Excise

Reversal of CENVAT Credit - unutilized balance in the Cenvat credit - SSI exemption availed - applicability of Rule 9(2) of Cenvat Credit Rules, 2002 - Held that - Rule 9(2) of Cenvat Credit Rules, 2002 is applicable only in case an assessee has got unutilized Cenvat credit balance, on the record date, when he opts to avail exemption. Admittedly in the facts of the present case the Cenvat credit balance was nil as on 31-3-2003 - no amount was required to be reversed or paid under the provisions of Rule 9(2) of Cenvat Credit Rules, 2002 which is equivalent to the provisions under Rule 11(2) of Cenvat Credit Rules, 2004. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the appellant, a manufacturer of Printed Circuit goods, is required to reverse any amount under the fact that the unutilized balance in the Cenvat credit was nil as on 31-3-2003 upon opting for full exemption from payment of duty under Notification No. 8/2003 with effect from 1-4-2003.

Analysis:
The appeal was filed by the appellant, M/s. Eltek Circuits, challenging Order-in-Appeal No. 212-CE/MRT-II/2005 passed by the Commissioner of Central Excise & Customs (Appeals), Meerut-II. The main issue in this case was whether the appellant, being a manufacturer of Printed Circuit goods, was required to reverse any amount upon opting for full exemption from duty under Notification No. 8/2003, considering the unutilized balance in the Cenvat credit was nil as on 31-3-2003.

Upon hearing both parties, the judgment referred to Rule 9(2) of Cenvat Credit Rules, 2002, which is similar to Rule 11(2) of Cenvat Credit Rules, 2004. The rule states that a manufacturer opting for exemption from duty under a notification based on value or quantity of clearance in a financial year, and who has been taking Cenvat credit on inputs before such option, shall pay an amount equivalent to the Cenvat credit, if any, allowed to him in respect of inputs lying in stock or in process on the date of opting for exemption. The rule further mentions that the balance, if any, shall lapse and not be utilized for duty payment on any excisable goods.

The judgment analyzed that the rule is applicable only if the assessee has an unutilized Cenvat credit balance on the record date when opting for exemption. As the Cenvat credit balance was nil as on 31-3-2003 in the present case, the judgment concluded that no amount was required to be reversed or paid under the provisions of Rule 9(2) of Cenvat Credit Rules, 2002, equivalent to Rule 11(2) of Cenvat Credit Rules, 2004. Consequently, the appeal was allowed, the impugned order was set aside, and the appellant was entitled to any consequential benefits as per the law.

In conclusion, the judgment clarified the application of Cenvat credit rules in cases where there is no unutilized balance, ensuring that no amount needed to be reversed in the specific circumstances of this case.